How football can teach us valuable investment lessons - Sarah Coles

Learning how to handle a loss is key. My son’s team had an abysmal season a couple of years ago, after none of them got the puberty memo and remained resolutely tiny while every opposition team morphed into adult men. The first losses were tough, but after a season of it, they learned not to over-react to disappointments.

The same holds true for investments. All investors will have setbacks at some point. It’s easy to be overwhelmed by disappointment, and opt for a knee-jerk reaction. But the best possible approach is to take a deep breath, regroup to make sure your long-term strategy still suits you, and then take a long-term view. Over the long term it was always highly likely that those boys would grow – and the same goes for investments.

Sometimes you can be derailed by a win too. In both football and money, sometimes things will go well and set sky-high expectations. The lads had one golden tournament early on, where they sailed through every round and came second. Unfortunately, it meant for a couple of years afterwards, they expected the same thing at every tournament, and when they exited during the early rounds there was frustration aplenty.

Expectations can make it difficult to get a handle on money too. Savers remember the years when they earned 5 per cent or more on their savings, and some of us remember double-digit savings rates – so less than 1 per cent feels miserable. It’s no wonder that savers are so frustrated right now. But like the coach continually told the boys, the key is to do as well as you can right now, regardless of the past.

For your savings this means shopping around for the best available rate and switching, rather than sticking with a miserable high street savings account paying 0.01 per cent in the hope things will get better.

Many of the lessons learned on the pitch took far longer than you’d imagine. We had years of every child wanting the ball at all times. There are plenty of investors who get stuck in this pattern too, chasing after the flavour of the month. Often this means joining a bandwagon just as it’s running out of steam.

There were also a frustrating few years when every lad wanted to be a striker, so you’d end up with 10 boys pushing further upfield until the opposition got possession, and ran down an empty pitch to score. Taking too much risk left them exposed.

It’s how too many investors start building a portfolio too – packing it with high risk stocks and bitcoin in the hope of getting rich quick. Unfortunately, this means taking an unacceptable level of risk, which can backfire horribly. It’s why a sensible, diverse portfolio uses a mixture of secure, defensive assets (like a savings account), steady midfielders (like multi-assets funds) and then the right balance of more adventurous investments (like global funds).

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Thank you

James Mitchinson